I've owned 3 cherokees; a 1990, 1998 and now a 2000.
I've also owned some other SUV's and trucks such as an early 1990's 4runner etc.
The 2000 is more refined than the pre-1997 models and has the most powerful iteration of the 4.0 engine. The AW4 automatic transmission is bomproof and the 5spd manual is solid as well. Models with ABS came with the weak D35 rear axle, which really won't give you any problems for the use you mentioned. If you want to get into serious 4wheeling down the road then look for a model without ABS since they'll come with the Chrysler 8.25 rear axle which is easily strong enough to handle 35's without problems. The front D30 is plenty strong up to 33's and many guys run 35's without problems.
The 4.0 is pretty bombproof as long as it hasn't been overheated too many times or run low on oil, it'll be good to go, same as every other engine out there.
I get great gas mileage from mine. My 1990 and 1998 were automatics with the 4.0 and I could consistently get 26mpg on the highway from Nelson to Vancouver many many times no matter how hard I drove them. The 2000, which I'm driving now, is a 5spd and I just got 29mpg on the same drive with some 4wd in the snow.
By comparison my 1990 4runner V6 was lucky to get 18mpg on the same drive but was dangerously underpowered for highway driving and my full size F150 with a 5.0 V8 gets 19mpg on the same drive, I can't see why anyone would say the 4runner is a better vehicle when it gets worse mileage than a full-size pickup and can barely maintain speed on the highway.
I've never had any problems with any of my jeeps and have probably logged more than a couple hundred thousand km's between them without anything more than regular oil changes and transmission fluid changes. Maybe I've just been lucky, but I know more people driving old Toyota's who spend thousands a year on repairs but keep putting money into them "because it's a Toyota". Bottom line is that any older vehicle can be good or bad depending on the previous service and well, sometimes you just get a lemon.
I think the price might still be a little high, I'd offer $2k like you said.